Forfeiture of benefits

[Guest jmc51]

May a plan provide that if a participant elects an optional form of benefit and the participant dies within one year after the annuity starting date, that the beneficiary receives a minimal pension benefit (defined as same benefits that participant received up to a total of 60 months). But if the participant lives one year then the beneficiary receives benefits under the optional form.

411(a)(3) would seem to permit this. However, Treasury Regulation 1.401(a)-20, Q-10(a)(4) states that once the annuity commencement date occurs a plan must pay the benefit in the distribution form elected. It is my understanding that Treasury Regulation 1.401(a)-20 is directed at the QJSA and QPSA, does it apply to optional forms of benefits in this instance?

Any thoughts? They are greatly appreciated.

[Mike Preston]

I'm pretty sure I've seen these sorts of provisions. So I *think* it can be done. However, the nomenclature needs to fit the benefits being paid. That means to me that a participant electing the equivalent of a 100% J&S is actually electing a benefit of a 1 year pension payout with death benefit equal to 60 months minus number of months benefits have been paid plus a one year deferred benefit of a 100% J&S.

Documents with that sort of language can take a while to digest. Benefit election forms can be a challenge, too.

[Guest jmc51]

Does anyone have any thoughts on whether such a benefit would violate the minimum distribution rules of 401(a)(9).